Bharti Plunges to Six-Year Low on Goldman Downgrade

Bharti Airtel Ltd. (BHARTI), India’s largest mobile-phone operator, sank to the lowest price in almost six years after brokerages including Goldman Sachs Group Inc. cut the stock’s rating on concerns the company’s expenses may rise.

Bharti slumped 6.4 percent to 256.75 rupees, the lowest close since Oct. 26, 2006, and the biggest loser today on the BSE India Sensitive Index (SENSEX) and the MSCI Emerging Markets Index. The stock slid 6.6 percent yesterday after reporting earnings that missed analysts’ estimates.

Goldman Sachs and Standard Chartered Plc cut their ratings on expectation the company will have to boost promotion costs as it seeks to grow market share in India and Africa. Bharti, controlled by billionaire Chairman Sunil Mittal, said yesterday that telecommunications revenue in India were depressed because of “hyper-competition” and higher network costs.

“The disappointment was more on costs, than on revenue,” Standard Chartered analysts Rahul Singh and Saurav Anand said in a note dated yesterday. The brokerage lowered its rating to in- line from outperform and reduced the price target to 274.35 rupees from 300 rupees.

Bharti’s net income will see an impact from competition for the next 12 to 15 months, compared with the six to nine months predicted earlier, the analysts wrote.

Price cuts and promotions offered by Bharti to regain its market share locally will spur “aggressive responses” from rivals, wrote Sachin Salgaonkar, an analyst at Goldman Sachs, in a note to clients yesterday. He cut the rating to neutral from buy, adding the “aggressive spend” will impact the company’s profitability.

Bharti’s Nigerian unit invested $1.2 billion in the past two years to expand its business in Africa’s most populous country, the Lagos-based company said today by e-mail.

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net